After meteoric rise, Grooveshark insists it's no falling star

Wednesday

Feb 15, 2012 at 6:12 PM

There might be no better sign that Grooveshark has arrived than the fact it is being sued by all four major record companies.

By Anthony ClarkBusiness editor

The online music company Grooveshark is the darling of the Gainesville tech community.Two University of Florida undergrads started the service in 2006, and since then Grooveshark has grown to 35 million users, 15 million songs and 120 employees occupying most of the second floor of Union Street Station. The company has inspired and mentored several tech entrepreneurs who make up part of a burgeoning student startup movement that is becoming ubiquitous in downtown Gainesville.

But there might be no better sign that Grooveshark has arrived than the fact it is being sued by all four major record companies.In November 2011, Universal Music Group filed its second copyright infringement lawsuit against Grooveshark, alleging the willful use of unlicensed songs owned by Universal. Sony Music and Warner Music Group later joined the suit, among other labels.Then in January, EMI, which had signed a licensing agreement with Grooveshark in settling another copyright case, sued, alleging nonpayment of royalties.Despite what appears to be a classic case of David vs. Goliath — or in this case four Goliaths — founders Sam Tarantino, 25, and Josh Greenberg, 24, appear undaunted, at least outwardly."All the precedence in this space is sort of leaning in our direction, so we're pretty confident we're within the DMCA," Tarantino said.

The DMCA is the Digital Millennium Copyright Act, which holds Internet content providers blameless if they remove unlicensed copyrighted material at the owner's request. That way, they are not punished for the activities of their users.Both YouTube and Veoh online video services have prevailed in similar lawsuits under the provisions of the DMCA.Grooveshark streams songs uploaded by users and shares revenue with copyright owners based on the number of times a song is played. The company makes its money from advertisements, subscriptions for mobile device apps and, increasingly, from artist promotions. On Monday, Grooveshark started charging $4 monthly subscriptions in certain countries.The company has licensing agreements with more than a thousand record companies, with EMI being the only major one.Tarantino characterized EMI's lawsuit as a contract dispute Grooveshark expects to settle.Universal officials could not be reached for comment. The copyright lawsuit says Grooveshark is a pirate website with no license on a vast majority of the songs it makes available, including thousands of songs copyrighted by the plaintiff record labels.The lawsuit also names seven Grooveshark executives and employees individually, pointing to internal emails that purportedly show that executives personally uploaded thousands of infringing songs and directed employees to do the same.The record labels are seeking $150,000 per song.Michael Robertson has been in Grooveshark's shoes. The San Diego entrepreneur has started several online music services, most of which have been sued by record companies. Universal first sued his MP3.com service — one of the early successes of online music — and later bought it for $400 million. Robertson now runs MP3tunes and DAR.fm."It's completely unsurprising that the record labels would use a legal hammer to try to slow down Grooveshark," he said. "That's what they do. Rather than try to change their business, rather than adapt, they try to crush companies by taking them to court."Robertson said it's also no surprise that Universal's lawsuit purports to have evidence that Grooveshark executives are directly responsible for piracy."That's a well-rehearsed strategy by record companies in each one of those instances," he said. "They made the same allegations against YouTube. They made the same allegations against me. They made the same allegations against Veoh executives."